IRC 6901 provides a transferee liability against a recipient (transferee) of property from the transferor, for the tax liability of the transferor and is a tool used to collect a taxpayer’s tax liability. A transferor is the person or entity who created the tax liability and transferred assets to another party. The transferee is the person or entity who is additionally liable for the tax (because they received the transferred assets for less than full, fair and adequate consideration).

The government can assess another taxpayer’s (transferor’s) liability against a transferee to collect this tax liability based on some other provision of state or federal law. The liabilities include taxes, penalties and interest. Taxes and penalties are computed through the date of the transfer, while interest may not be limited to the date of the transfer. It also includes additional liabilities resulting from an examination.

Appeals considers and processes transferee cases in much the same manner as other cases. The administrative file of a transferee case must contain the tax returns of the transferor with a revenue agent's report.

Use current transcripts to confirm the liability was assessed against either the transferor or one or more transferees.

Refer to IRM 8.2.1.8.3, Verification of New Information, for procedures regarding the verification of new information or evidence received during the appeals process.

When establishing transferee/transferor cases on CASES, remember the following:

When a transferee/transferor case is received that contains both transferee and income tax liabilities, it is established in one of two ways: (1) the transferee liability and transferor case are established as one work unit and the income tax liability as a separate work unit; or (2) if the income tax liability is related to the transferee/transferor adjustments, all are established in one work unit by using a TIN modifier (A through J) to distinguish the transferee case.

Establish the transferee and income tax (related) cases first and the transferor (key case) last.

When possible, give simultaneous consideration to the transferor and all transferees. If any of the cases are pending in another Appeals office, consolidate them if possible. If consolidation is not possible, coordinate case processing.

If the possibility of transferee liability first comes to light during Appeals consideration of a case, advise the Area Director and request the appropriate investigation.

Additional information regarding transferee cases is found in IRM 4.11.52, Transferee Liability Cases.

Immediately obtain a current transcript on the transferor since the transferee's statute of limitations is based upon the transferor's statute of limitations.

Verify the statute of limitations on all new case receipts and follow the guidelines contained in IRM 8.21, Appeals Statute Responsibility, with respect to protecting the statute. Appeals will not accept non-docketed cases if less than 365 days (or less than 180 for a case being returned from Compliance after their consideration of a new issue or new information) remain on the statute of limitations for assessment. Refer to IRM 8.20.5.3.1.3, Cases Not Accepted by Appeals, for additional information on statute of limitations requirements for new case receipts in Appeals.

Extend the period of limitations for assessment against the transferee by using Form 977, Consent To Extend the Time To Assess Liability at Law or in Equity for Income, Gift and Estate Tax Against a Transferee or Fiduciary. This will not extend the period for assessment against a transferee of a transferee.

Separate extensions are necessary for each transferee.

In the case of a statutory merger, consolidation or a mere change in identity, form, place or organization, the new or surviving corporation is held to be the same as the old and is primarily liable for the debts of the old. Take action against the new or surviving corporation within the statutory period of limitation for assessment against the transferor.

See IRM 8.21, Appeals Statute Responsibility, for additional information on consents and statutes for Appeals cases.

This subsection covers the procedures followed by the Tax Computation Specialist (TCS) or other Appeals employee who prepares settlement computations on transferee cases.

Generally, the settlement computation in transferee cases shows a recomputation of the transferor’s unpaid liability, including assessed tax and any assessed penalties.

When preparing the recomputation of tax (on Form 5278, Form 4549, etc.) show the transferor’s name, SSN, and tax period on all schedules since the recomputed tax is actually the transferor's.

Unlimited liability cases: Value of the assets the transferee receives from the transferor exceeds the transferor's unpaid tax liability, or deficiency. The liability of the transferee is the full amount of the unpaid tax or deficiency of the transferor.

Limited liability case: Value of the assets transferred to the transferee is less than the transferor's unpaid tax liability, or deficiency.

The following table is a guide to actions needed in each particular situation:

Carefully check a current transcript to see if the transferor’s liability was assessed either against the transferor or against other transferees, or if there are payments on the liability. There may be a need to secure NMF transcripts when working transferee/transferor cases.

If the transferor made payments to reduce the liability, the payments are netted against the tax, penalties and interest for the earliest tax periods first.

See IRM 8.7.5.9. This section entitled, Issuing a Notice of Liability on an Unagreed Transferee Case, has additional information about transferee cases, including a discussion of limited and unlimited liability. See also IRM 4.11.52, Transferee Liability Cases, for more information.

Form 2045, Transferee Agreement, is an admission of status as a transferee and waives any requirement for issuance of a statutory notice to the transferor. It is not, however, a substitute for a waiver of restrictions against the assessment of tax against the transferee.

Secure agreement Form 870-T in settled cases involving transferee liability.

For an agreed Estate and Gift Tax Transferee case, secure agreement Form 890–T.

For an agreed Employment Tax Transferee case, secure agreement Form 2504 or Form 2504–WC, whichever is appropriate.

In the case of a transferee (other than one liable under section 31 U.S.C. section 3713) insert the following on the agreement form: "This represents the undersigned's liability as a transferee of the assets of (name and address of transferor) for (type of tax), penalties, and interest thereon as provided by law due from said transferor."

If the transferor's total liability exceeds the assets transferred insert the following on the agreement form - "This, plus interest thereon, represents the undersigned's liability as a transferee of the assets of (name and address of the transferor) for (type of tax), penalties and interest thereon, to the extend of the net value of the assets received from the transferor, plus interest thereon as provided by law. It has been determined that the net value of the assets received is (value of the assets received)."

For information concerning closing agreements in transferee cases, see IRM 8.13.1, Closing Agreements.

Treat the transferor case as the "principal" or "key" case when preparing Form 5402 and Form 5403 and case memos. This applies even when the amount of the unpaid liability against the transferor was assessed. For case memos in related cases, see IRM 8.6.2, Conference and Settlement Practices, Appeals Case Memo Procedures.

If there is concurrent settlement of the transferor and transferee cases, instruct Account and Processing Support (APS) to abate any excess assessment against the transferor. Then, waive the liability against the transferee(s) if the agreed liability is paid immediately by or for the transferor.

If the liability, or any part of it, was not assessed against the transferor, instruct APS to include it in the required payment and assess it.

If the liability of the transferor was assessed against the transferee(s), instruct APS to abate the transferee assessment(s).

To avoid misunderstandings, Appeals Officers must advise taxpayers or representatives of the rate of transferee interest and the date from which it is computed. For example, under varying state law in limited liability cases, it might be computed at the legal rate from one of the following:

Appeals Officers should seek Counsel's advice when determining the applicable interest rates in transferee liability cases.

In situations where there are multiple transferees and not all agree, close the key transferor case with the agreed transferees and create a new key case for the transferor along with related cases for the remaining unagreed transferees.

Tax Computation Specialists (TCS) are generally responsible for the preparation of Notices of Liability in transferee/transferor cases.

Notices are issued to a transferee (at law or in equity) liable for income, estate, and gift taxes; including liability of a fiduciary under 31 U.S.C. section 3713(b) for income, estate and gift taxes; and in respect of taxes arising on a liquidation of a partnership or corporation, or on a reorganization within the meaning of IRC 368(a), liability in respect of any tax imposed by the Internal Revenue Code.

Notices of transferee liability are issued for employment taxes only to the extent that a notice of determination of worker classification would have been issued to the transferor. IRC §6901, Transferred Assets, provides "the liability will be assessed, paid and collected in the same manner as in the case of the taxes with respect to which the liabilities were incurred." Therefore, the only time a notice of transferee liability is issued for employment taxes is when the transferor's employment tax liability was based upon worker classification issues under IRC §7436.

Since notices of deficiency are not issued to a taxpayer for excise taxes, no notice of transferee liability is issued to a transferee regarding excise taxes.

Issue the notice to the transferee within the applicable statutory period (usually one year beyond the transferor's limitation date) whether or not a Notice of Deficiency was issued to or assessed against the transferor.

The term "transferee" includes transferee of a transferee, heir, legatee, devisee, distributee of an estate, shareholder of a dissolved corporation, assignee or donee of an insolvent person, successor of a corporation, party to a reorganization defined in IRC 368, and all other classes of distributees. It also includes in gift tax cases, the donee, without regard to the solvency of the donor, and any person who, under IRC 6324(a)(2), is personally liable for any part of the estate tax.

IRC 6901 provides for assessment and collection against a transferee of property for tax liability of the transferor, and describes the types of tax liabilities to which this provision applies.

There are many different aspects of the law to consider when determining whether the transferee's liability is limited or full. The Appeals Officer, Appeals Team Case Leader or Counsel Attorney is responsible for making the determination and providing the information to the TCS when requesting work. The Appeals Officer, Appeals Team Case Leader or Counsel Attorney must also provide the approximate date that the assets were transferred to the transferee. If liability is limited, they must provide the amount of the limited liability.

The following provides a simple overview of limited and full liability:

Usually transferee cases in which Notices of Liability are issued by Appeals, cover the following situations:

There are three parts to the Notice of Liability:

For transferee cases involving types of tax other than income tax, alter the letter and statements to fit the type of tax.

Tax Court has jurisdiction to redetermine the deficiency determined by the Service. In a case commenced in the Court by a transferee or fiduciary, jurisdiction depends upon the issuance by the Commissioner of a notice of liability to the transferee or fiduciary.

Appeals may ask Counsel to prepare the settlement documents on cases involving transferee or fiduciary liability.

If a transferee petitions the Tax Court, a "dummy" docket number is added to the transferor (key case). Update the AIMS to status 82 (if on AIMS). The transferee(s) carries the actual docket number, revised statute date, and notice of deficiency information. When appropriate, use closing code 43 to move the work unit to Part 3.

If the transferee is on AIMS, prepare Form 5403 for the transferor following IRM Exhibit 8.20.7-1. Also make the following entries:

If the transferees are not on AIMS, no Form 5403 is prepared. Instead, assess each transferee on NMF using the information provided on Form 1296 , Assessment Against Transferee or Fiduciary. See IRM 8.7.5.6.3.

Forward the applicable Forms 1296 with the Form 5403 of the transferor to the Campus.

Update ACDS using general closing instructions. In addition make the following entries:

Administrative assertion of transferee liability for income, estate and gift tax is provided by IRC 6901(a)(1).

Administrative assertion of transferee liability for certain other taxes is provided by IRC 6901(a)(2).

Administrative assertion of liability against a fiduciary under 31 U.S.C. 3713(b) is provided by IRC 6901(a)(1)(B).

The following opening paragraphs are generally used in letters addressed to transferees with respect to their liabilities for an unpaid deficiency of the transferor in income, estate and gift tax cases.

Opening paragraphs for letters addressed to transferees or fiduciaries in the following unique situations are shown below: